Why some Oregon hospitals charge three times more than others

A balloon angioplasty to unclog heart arteries costs about $52,000 at St. Charles Medical Center in Bend, more than three times the typical amount insurers paid Tuality Community Hospital in Hillsboro, according to hospital payment comparisons posted online today by Oregon health officials.

In the Portland area, the going rate for spinal disk surgery ranged from $13,000 at Providence St. Vincent Medical Center to $7,700 at Legacy Good Samaritan Medical Center.

When Oregon began disclosing details of hospital billing three years ago, officials hoped to spur competition that would hold back costs and reduce the huge variations in rates from hospital to hospital. The latest data from 2009 suggest that little has changed. Hospitals with the most clout command payments two to three times higher than the lowest-priced hospitals. And hospital costs overall continue to soar.

State officials insist that price information will help consumers obtain more affordable hospital and medical services.

"There is a real need for transparency," said Sean Kolmer, deputy administrator of the Office for Oregon Health Policy and Research. The agency is preparing to release more prices next year, including data from a larger number of insurance companies and payment rates for outpatient, medical clinic and dental care.

Until recently, the only publicly available costs on hospital charges in Oregon were more like sticker prices with little connection to the discounted rates negotiated by insurers and employer groups. In a given year, U.S. hospitals collect only about 40 percent of their "charges" from patients or insurers.

The Oregon Health Authority's online price comparison tool allows consumers to compare actual payments made to hospitals by the nine largest commercial health insurers. Oregon was among the first states to report such payments, along with New Hampshire and Pennsylvania.

It remains to be seen whether revealing such information will help people afford hospital care.

"For the average consumer, and even for insurers, it makes no difference because hospitals are going to charge what they want to charge," said Jeff Heatherington, president of FamilyCare Inc., a health plan that serves Medicare and Medicaid recipients.

"You really do not have a competitive market for hospitals anywhere in the state," he said. "None of the health reform stuff at state or national level is going to change that."

Tim Fleischmann, chief financial officer for Tuality Healthcare, said few if any consumers shop for low-priced hospital care. Those with insurance often face the same co-payment or cost-sharing no matter which hospital. Most choose the most conveniently located, Fleischmann said, or the hospital recommended by a doctor.

"If you need bypass surgery, you don't compare prices and drive out to Hillsboro," he said.

Hospital executives cite a variety of reasons for steep inflation, and wide variation, in prices. Hospitals have varying overhead. Some are more efficient or better at managing expenses. Others may invest more heavily in technology, have an unusually large proportion of patients covered by low-paying government programs for retirees or the poor, or maintain a marginal or unprofitable service, such as inpatient mental health. To cover such costs, hospitals raise prices paid by commercial insurers.

In some instances, hospital executives say, the state's payment data are misleading. Payments for child-birth services at Providence hospitals, for example, appear higher because they include anesthesia, unlike many other hospitals where anesthesiologists bill separately, said Providence Health & Services Chief Operating Officer Terry Smith.

St. Charles Medical Center's chief financial officer, Karen Shepard, questions the significance of many of the payment comparisons because they are based on so few cases. The data on bypass surgery at St. Charles, for instance, is based on three cases. With such low numbers, Shepard said, one unusually complicated case could make a hospital look more expensive than it really is.

To minimize that problem, Oregon officials divided patients into two groups: those with minor or moderately severe disease and those with major or extremely severe disease.

The payment data suggest that lack of competition explains much of the difference in prices. Cities with one hospital tend to have higher prices. St. Charles Medical Center in Bend, for example, stands out as one of the costliest in the state. In Portland, where numerous hospitals compete, payments are consistently lower than the state average. Among Portland hospitals, multihospital systems such as Providence tend to command higher payments than smaller competitors such as Adventist Medical Center or Tuality Health Care.

"I don't have the same negotiating power as the Providence health system when I sit across the table from Regence BlueCross BlueShield," said Tuality's Fleischmann. Providence operates hospitals in Hood River, Medford, Seaside, and five in the Portland area. "If you are an insurer you've got to have a contract with them," he said.

In some cities and towns with only one hospital, many of the local doctors are employees of the hospital, Heatherington said.

"It's essentially a monopoly," he said. "They can name all sorts of prices."